Manufacturing footprint, outsourcing and cost out. by Jean-Marc Lechêne, COO

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1 Manufacturing footprint, outsourcing and cost out by Jean-Marc Lechêne, COO

2 Agenda 1. Personal background 2. New Manufacturing and Global Sourcing setup in place 3. Key priorities and achievements 2 Vestas capital markets day 2012

3 Introducing your speaker Jean-Marc Lechêne Executive Vice President of Manufacturing and Global Sourcing (COO). Member of Vestas Executive Management team. Joined Vestas in July MBA from INSEAD and Master s degree from École des Mines de Paris. 15 years of experience managing multi billion business units with Lafarge and Michelin in China, North America and Europe. Live in Denmark with my wife. 3 Vestas capital markets day 2012

4 What I bring to the table Past experience Major cost reduction and restructuring programs in global companies. General management in process and manufacturing industries. Strategist and doer: Delivering change to the bottom line. Today s challenges Implementing a lean, flexible and asset light production setup without compromising safety and quality. Eliminating unnecessary costs and complexity out of products and the whole value chain. Reinforcing the alignment between Sales, R&D, Manufacturing, Sourcing and Service. 4 Vestas capital markets day 2012

5 Key priorities Shipment from factories GW 1. 5 GW shipment run rate in % 2. Product cost out Identification of outsourcing opportunities 4. Global sourcing 2012E 2013E 5 Vestas capital markets day 2012

6 New Manufacturing and Global Sourcing setup in place A streamlined organisation Manufacturing and Global Sourcing Global Sourcing Quality Supply Chain PEX Finance People & Culture Blades Assembly Controls & Generators Components 6 Vestas capital markets day 2012

7 A leaner Manufacturing organisation Reductions in number of employees Hourly paid employees in Manufacturing Number of employees -8% Salaried employees in Manufacturing Number of employees -34% 2011 FY 2012 end Sep FY 2012 end Sep. 7 Vestas capital markets day 2012

8 A leaner Manufacturing organisation Implemented adjustments Sale of tower factory in Varde (DK) Closure factory in Hohhot (CH) Reduction of manufacturing work force at tower factory in Pueblo, Colorado (US) Reduction of manufacturing work force at nacelle assembly in Brighton, Colorado (US) Cease of production at the controls factory in Ólvega (ES) Reduction of production capacity at the blade factory in Damiel (ES) 13 June June August August October October Vestas capital markets day 2012

9 North America highlights The challenge US market uncertainties* Sustained activities in Canada and Mexico Lay-off costs Rehire, training and ramp-up costs Mouth-balled plant costs Logistics costs Ongoing evaluation of and decision on our manufacturing footprint * On 2 August 2012, the Senate Finance Committee approved The Family and Business Tax Cut Certainty Act of 2012 bill. The bill includes a one-year extension of the PTC. In addition, the bill includes a five-per cent under construction threshold for projects that begin in The final bipartisan vote in support of reporting the bill was Vestas capital markets day 2012

10 Product cost out Multi-functional teams (R&D, Manufacturing, Sourcing) Best selling 2 MW and 3 MW platforms Scope: Bill of Material (BOM) Many projects completed EUR 30m EBIT impact in late 2012 Significantly larger impact in Vestas capital markets day 2012

11 Identification of outsourcing opportunities Many parameters in the economic equation: Sales proceeds Supply agreements (volume, price, quality, warranties, etc.) Direct savings Indirect savings Supplier quality management Various forms of divestment considerations In parallel, commercial discussions with external customers to increase utilisation E.g. the US duties imposed on towers imported from China and Vietnam increases the competitiveness of Vestas tower factory in Colorado, USA. 11 Vestas capital markets day 2012

12 A new way of working with our suppliers Fewer suppliers, but deeper relationships Objective To eliminate any unnecessary costs from products and the whole activity chain How Increased supplier involvement in development More systems, less parts More outsourcing: o Production o Value adding services Consequence A more strategic win-win relationship Fewer suppliers Higher expectations in terms of accountability 12 Vestas capital markets day 2012

13 Summary Manufacturing and Global Sourcing 1 We are adjusting our production capacity to the lower level of activity expected next year and we evaluate our manufacturing footprint accordingly. 2 We have a leaner structure that increases flexibility, transparency and agility, and which is more cost efficient. 3 We are on track in taking costs out of our products. 13 Vestas capital markets day 2012

14 Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic, electronic, or mechanical, including photocopying, taping, or information storage and retrieval systems without the prior written permission of Vestas Wind Systems A/S. The use of these documents by you, or anyone else authorized by you, is prohibited unless specifically permitted by Vestas Wind Systems A/S. You may not alter or remove any trademark, copyright or other notice from the documents. The documents are provided as is and Vestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you.

15 Disclaimer and cautionary statement This presentation contains forward-looking statements concerning Vestas' financial condition, results of operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning Vestas' potential exposure to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. There are a number of factors that could affect Vestas' future operations and could cause Vestas' results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interest rate fluctuations; (c) loss of market share and industry competition; (d) environmental and physical risks; (e) legislative, fiscal and regulatory developments, including changes in tax or accounting policies; (f) economic and financial market conditions in various countries and regions; (g) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, and delays or advancements in the approval of projects; (h) ability to enforce patents; (i) product development risks; (j) cost of commodities; (k) customer credit risks; (l) supply of components from suppliers and vendors; and (m) customer readiness and ability to accept delivery and installation of products and transfer of risk. All forward-looking statements contained in this presentation are expressly qualified by the cautionary statements contained or referenced to in this statement. Undue reliance should not be placed on forward-looking statements. Additional factors that may affect future results are contained in Vestas' annual report for the year ended 31 December 2011 (available at vestas.com/investor) and these factors also should be considered. Each forward-looking statement speaks only as of the date of this presentation. Vestas does not undertake any obligation to publicly update or revise any forward-looking statement as a result of new information or future events others than required by Danish law. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation Vestas capital markets day 2012